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by Ravi Ladduwahetty

A frontline reforms specialist has recommended to the Finance Ministry and the Central Bank of Sri Lanka that salaries of Government and Private sector employees be channelled through the national banking system, which would increase the floats in the banking system while also preventing social maladies.

The proposal has been made by the Consultant to the Financial Sector Reforms Committee Dr. Wickrema Weerasooria to Treasury Secretary Charitha Ratwatte and Central Bank Deputy Governor Manik Nagahawatte.

The proposal also entails the drafting of legislation to coincide with the 2004 Budget which will be presented by Finance Minister K.N. Choksy in Parliament in November. Statistics have revealed that only 40 percent of the Sri Lankan population have bank accounts and if these salaries of the six million working population was channelled through the banks, it will have a series of beneficial effects financially and socially, Dr. Weerasooria told the Daily News yesterday.

Among the series of benefits that the banking system will have, will be an increased level of funds that will be available for investments while statutory and corporate organisations will also be spared the bother of packeting these salaries. A further benefit that will accrue will be the prevention of health hazards where workers end the evening on pay day with the consumption of alcohol which will be welcomed by the housewives, he said.

However, he said that the banks should also take the salaries without levying service charges on salaries accounts.

He said that most of the developed countries had the system where public and private sector salaries were channelled through the banking system where 95 percent of the population had bank accounts. He said that the United Kingdom passed legislation as early as 1965.

Central Bank's Director of Economic Research Dr. A.G. Karunasena said that the annual salaries bill of the public service for 2002 was Rs. 88.8 billion while the salaries bill for 2003 was Rs. 90.7 billion. However, the private sector salaries bill was not available. When contacted for comments, Treasury Secretary Charitha Ratwatte said that an indepth study has to be done with regard to this proposal and that there was time for the 2004 Budget.

Meanwhile, the banking community also welcomed the proposal.

Hatton National Bank Managing Director/CEO Rienzie T. Wijeyetilleke, commending the proposal, said that this will be a bonus for all banking institutions as the bank floats will dramatically increase as the funds which will be available for investments will be much more than now.

He said that the private sector companies will also tend to gain from this as administrative hazards such as processing of salaries will be absent in the event of the system being made law. The other benefit that corporate and statutory organisations will enjoy from this will be the reduction of risks in payroll heists.

He said that the future development of this country will be based on technology and this procedure was also a stepping stone towards that. A further social benefit that will accrue will be the regulation of spending habits.

Sampath Bank Managing Director/CEO Anil Amarasuriya said that the proposal was good but the consumer needs had to be looked after as well in terms of withdrawals.

Former President of the Bankers' Association and Country Head/CEO Kapila Jayawardena said that this would be an ideal mode for increased savings which was currently around 15 percent of GDP.

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